household demand for
Broadband internet service
massachusetts Governor Deval Patrick signing legislation to make high-speed internet available in the state’s 32 communities lacking access to broadband service.
WhaT is The market de- mand for broadband by U.S. households? It is well known that demand for broadband Internet has grown substantially
in the last decade. That growth has
driven the demand for computers,
routers, fiber-optic cable and much
more. Our research puts some statistical numbers behind this widely recognized growth. 2 We estimated consumer willingness-to-pay (WTP) for
broadband service in late 2009 and
early 2010. Our WTP estimates show a
high valuation for broadband for average consumers, and even for inexperienced users.
IMAGE COUTESY OF THE OFFICE OF GOVERNOR DEVAL PATRICK
There are many proposals for increasing the deployment and use
of broadband infrastructure, most
importantly the FCC’s National
Broadband Plan (see http://www.
broadband.gov/plan/). Formal cost-benefit evaluation of these proposals
requires, among other things, some
understanding of the potential benefits from more widespread access
to broadband Internet service. Our
study provides more understanding
of those benefits.
Choice experiments were used to es-
timate household preferences for the
different features that comprise Inter-
net service, including the basic service
features speed and reliability, in addi-
tion to recent and hypothetical uses
of the Internet. A carefully designed
choice experiment manipulates the
features for a series of hypothetical
Internet services to obtain the varia-
tion in the data needed to estimate
the parameters precisely. Choice ex-
periments also allow us to estimate
the marginal utilities (satisfaction) for
service features that are not currently
available or are only available in lim-
ited geographical areas.